New Zealand Markets open in 7 hrs 13 mins

Dollar Resilience Being Tested in Lead Up to Fed Decision

Han Tan
The Dollar index appears to be carving a path back down towards the psychological 97 handles, having been in a holding pattern in the hours leading up to the Federal Reserve’s policy announcement.

Open your FXTM account today

The US central bank is expected to keep interest rates unchanged this week, while expressing a more dovish policy stance that could pave the way for interest rate cuts over the coming months. Rising expectations over a Fed rate cut is testing the resilience of the DXY, whereby a Fed statement that’s interpreted as more dovish compared to market expectations could see the DXY unwinding its recent gains.

EURUSD tests 1.12 support level

The DXY was recently given a boost by the ailing Euro, following ECB President Mario Draghi’s dovish guidance towards potentially more policy stimulus for the Eurozone. EURUSD’s stay above the 1.13 psychological level proved short-lived, as it now tests the 1.12 support level. However, should the Fed prepare markets for a potential US interest rate cut, the Dollar’s softness may allow the Euro to pare recent losses and open a path back up to 1.13.

GBPUSD opening path towards 1.25

The Pound has been weighed down by Brexit uncertainties and political turmoil, as the UK Conservative party’s hunt for a new leader is underway. With GBPUSD opening a path towards the 1.25 psychological level, Sterling bears have clearly made their presence felt in the markets, as GBPUSD continues to hunt for a stronger floor. While a new UK Prime Minister is appointed by end-July may remove a layer of uncertainty over the Pound, Brexit’s uncertain path remains a major overhang over GBPUSD, which could mute future attempts at carving out gains.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

This article was originally posted on FX Empire

More From FXEMPIRE: